Practice Beat

By Joan Rose, Senior Editor

Managed Care
Aetna bows to a Big D-mand to put care in doctors' hands

Texas Attorney General John Cornyn has won landmark concessions from Aetna US Healthcare that could affect physicians and the care they provide nationwide. In settling a suit that was filed in December 1998, Aetna has agreed to:

• End financial incentives that reward or penalize doctors for meeting or exceeding certain budgets.
• Drop the requirement that physicians join all of its plans or none.
• Reimburse physicians with fewer than 100 Aetna HMO members on a fee-for-service basis, rather than capitation.
• Give doctors 90 days' notice of significant changes in policies or practices that will affect their participation in Aetna networks.
• Not use economic profiling to discourage physicians from providing medically necessary care.
• Allow standing referrals for patients with chronic, disabling, or life-threatening conditions.

To encourage capitated physicians to provide more preventive care, the insurer has also agreed to provide additional compensation for:

• Prescribing ACE inhibitors for congestive heart failure and anti-inflammatory drugs for asthma patients.
• Skin biopsies.
• Immunizations, allergy desensitization injections, asthma treatment, flu vaccines (for cardiac patients), and annual retinal eye exams (for diabetics).
• Seeing patients at least once every 12 months.
• Referring patients with complex asthma to specialists.
• Encouraging patients with diabetes, hypertension, or congestive heart failure to take medications.

Other provisions in the 51-page "Assurance of Voluntary Compliance" address how Aetna will handle determinations of medical necessity, and who will preside over external reviews. The agreement also indicates that treatment denials ultimately will be determined only by physicians licensed to practice in Texas.

Although the agreement currently affects Texas doctors only, Aetna's chief medical officer, Arthur Leibowitz, says the company is study- ing the feasibility of extending these initiatives to other markets. And Cornyn hopes to convince PacifiCare, Humana, and NYLCare to settle suits pending against them by promising to comply with the provisions of the Aetna agreement.

The entire agreement is available online at www.oag.state.tx.us/notice/avc_fin1.pdf.

HMO Failures
A tide of red ink swamps plans

Despite a strong economy and booming stock market, HMO failures are surging, according to Weiss Ratings, a financial-rating firm based in Palm Beach Gardens, FL. Sixteen HMOs folded last year—nearly twice the number that went belly up in 1998. And most companies in the HMO industry are still losing money, says company chairman Martin D. Weiss.

A.M. Best, another ratings firm, agrees, blaming aggressive expansion and inadequate pricing for managed care failures. Although the overall financial outlook for HMOs is guarded right now, Best notes, there nevertheless are a significant number of new entrants nationally that are better capitalized and have more realistic premiums. However, the number of companies able to offer multistate plans is declining.

Last year, according to Weiss, HMOs in 13 states failed:

• American Preferred Provider Plan (New Jersey)
• Certus Healthcare and Comprehensive Health Services of Texas
• DayMed Health Maintenance Plan (Ohio)
• Greater Pacific HMO (California)
• Harvard Pilgrim of New England (Rhode Island)
• Horizon Health Plan and Community Health Plans of Kansas
• NorthMed HMO (Michigan)
• Owensboro Community Health Plan (Kentucky)
• Patient's Choice (Louisiana)
• Premier Healthcare of Arizona
• Suburban Health Plan and Wellcare of Connecticut
• Sunstar Health Plan (Florida)
• Xantus HealthPlan of Tennessee

For an in-depth report on the outlook for health plans, see "Where's managed care headed?" (April 10).

Docket Watch
A high court blocks an end run around confidentiality laws

A physician assigned by the state to investigate a medical malpractice complaint cannot be forced to testify about conclusions he drew that were based substantially on confidential peer review records, the California Supreme Court has ruled. Under California law, peer review records are immune from discovery, and the court said plaintiffs cannot obtain "the equivalent of discovery" by subpoenaing the testimony or report of the investigator who reviewed them.

A woman who had undergone a colonoscopy and her physician husband sued the hospital and two doctors who performed the procedure. Alleging that the woman hadn't been sufficiently sedated and that the physicians had proceeded with the colonoscopy after she asked them to stop, the plaintiffs sought damages for post-traumatic stress syndrome, loss of consortium, and other injuries. More than three years later, they lodged a complaint with the California Department of Health Services. DHS assigned an investigator, who examined the patient's medical records, interviewed her husband, and reviewed the minutes of a hospital peer review committee meeting.

Shortly before trial, the plaintiffs subpoenaed and received a copy of the investigator's preliminary report, but several of the paragraphs were blacked out or otherwise rendered unreadable. They then tried to add the investigator to their expert witness list. DHS moved to quash the subpoena, arguing that the investigator's findings were privileged, and a superior court agreed.

In upholding that decision, the appellate court noted that "strong public policy favor[s] the confidentiality of peer review evidence in the medical malpractice context," even if it hinders plaintiffs from obtaining evidence.  

A Medigap insurer goes under the class-action hammer

What seemed like a simple lawsuit involving small dollars has grown into a class action—and a nightmare—for one Medigap insurer.

A breast cancer patient in Massachusetts sued Bankers Life & Casualty and PCS (its pharmacy benefits management company) for overcharging her on prescription drugs. The woman's policy called for a 20 percent copayment when she bought brand-name drugs, but none when she used generics. The woman took tamoxifen—a drug PCS categorized as a brand name. When she asked her doctor to prescribe a different medication so that she wouldn't have to make the copayment, she learned that tamoxifen is a generic. When she complained to the insurer, Bankers Life told her to continue paying and she would be reimbursed.

In her lawsuit, the woman accused the two companies of breach of contract, breach of good faith and fair dealing, deceptive trade practices, and violation of the RICO antiracketeering act. Now US District Court Judge Joan P. Gottschall has certified the case a class action and denied the defendants' attempts to have the RICO claims dismissed.

Bankers Life had contended that, at most, the woman was merely inconvenienced by having to seek reimbursement for the amount she overpaid. "[R]ather than trying to snooker [her] out of 20 percent of the cost of her prescriptions," the insurer argued, "Bankers Life reimbursed her for past copayments and offered to pay for future copayments—hardly the signs of a scheme to defraud." But the judge saw it differently.

"The misclassification of a commonly prescribed drug, and the decision of Bankers Life to pay the one complaining policyholder rather than take steps to correct the misclassification, strongly suggests that there [is] a large number of victims and many predicate acts," Gottschall noted. What's more, she said, Bankers Life's refusal to correct the situation suggests "at the very least" that the insurer knowingly participated in an enterprise that resulted "in its receipt of large amounts of money to which it is not entitled."

Fraud and Abuse
California launches a new assault on scam artists

The California Department of Health Services is conducting cursory checks of physicians' offices and clinics in Los Angeles County to ensure that they are legitimate providers for Medi-Cal (California's Medicaid). According to the California Medical Association, the investigation was triggered by a local TV news report of bogus clinics billing Medi-Cal for services.

Most of the site visits are expected to be unobtrusive, with investigators actually contacting staff only if they can't determine a practice's legitimacy based on visual observation.

In addition to these inspections, the health department and attorney general's office have warned physicians to safeguard their identities. According to AG Bill Lockyer, criminals have been stealing physicians' names, office addresses, and medical license numbers from hospital personnel files. These scam artists then use the information to obtain new provider numbers for use in phony billings.

Physicians whose identities have been stolen may then find themselves embroiled in a Medi-Cal fraud investigation. Or they could come under IRS scrutiny as a result of false claims billed under their names.

Identity theft isn't unique to California. A federal report last year on Medicare fraud and abuse noted that similar scams have cropped up around the country.

Meanwhile, a growing number of professional liability insurers are offering policies or riders that protect physicians against government allegations of fraud and abuse. Eleven of the 17 member companies responding to a survey by the Physician Insurers Association of America reported that they cover fraud and abuse. Most limit the coverage to defense costs and cap their outlay at $25,000.